EPAL to introduce sliding scale to fees

EFTPOS Australia Payments, or EPAL, is introducing a sliding scale of fees for point-of-sale transactions as an incentive for merchants to accept EFTPOS for low-value transactions.

Changes to the interchange fee, currently a flat fee incurred by banks and merchants for every transaction, is a first for the company, which is owned by Australian banks and credit unions.

EPAL managing director Bruce Mansfield confirmed the new fee will be “much lower” than 12 cents, which is regarded as a global benchmark for EFTPOS pricing in comparable international schemes.

Although EPAL is yet to announce its interchange fee, Mansfield said lower costs and fraud rates would enable it to charge lower rates than its competitors Visa and Mastercard.

Russell Zimmerman, executive director of the Australian Retailers Association and chair of the Australian Merchant Payments System, says changes to the interchange fee have “been on the cards” for quite a while.

“The Reserve Bank wanted some competition for Visa and Mastercard, and for it to remain competitive,” Zimmerman says.

“Bruce Mansfield has assured me the industry will remain competitive and that it won’t be a huge impost on small business.”

“The fees charged are going to be more expensive than they are now but if they don’t do something and EFTPOS falls over, Visa and Mastercard will have a duopoly, which means higher fees for retailers both large and small.”

Since January, EPAL has charged scheme fees of one cent to both issuers and acquirers for each transaction, giving EPAL about $40 million annually to invest in system development.

It is hoped the sliding scale will reduce the use of cash, with EFTPOS embracing contactless payments technology to give it a competitive advantage over cash.

Meanwhile, Mansfield has said the introduction of debit card chip technology, perceived to be more secure than magnetic strips, will be a significant boost for EFTPOS.

He says EFTPOS is the cheapest, safest and most convenient debit payment platform in Australia, which is why it is preferred by both merchants and consumers.

“As we expand EFTPOS in the near future to include a comprehensive chip card solution and related infrastructure, its position as Australians’ preferred debit option will strengthen,” Mansfield said in a statement.

“Pressing Cheque or Savings on the growing number of scheme debit cards is still the most cost-effective and secure option.”

“We are committed to ensuring that any changes to the EFTPOS proposition for merchants and consumers are carefully calibrated so that EFTPOS remains the most competitive debit payment system available to Australian retailers.”

From 2014, all new debit cards and devices will be chip-enabled, with several major banks already issuing chip cards.

EPAL is also planning to create a recognisable brand for EFTPOS, develop online functionality, and establish international compatibility between debit schemes.

EFTPOS cannot yet accommodate online transactions, unlike Visa and Mastercard, both of which have introduced debit products with the ability to handle online transactions.

Mansfield said EPAL’s membership, which includes the major banks, Woolworths and Coles, is considering a move into the online space although he predicted this was unlikely to happen before 2012.

“While 90% of transactions occur face to face, we recognise that online is an emerging market,” he said.